Escrow Basics

Escrow is the process where a neutral, third party is hired to gather all the information needed by the parties to close the transaction, including receiving funds and documents, completing and filing required forms and obtaining release documents for any loans or liens that are paid off as part of the transaction.

Typical documentation collected by the escrow agent/holder includes:

Loan documents

Tax statements

Fire and other insurance policies

Title insurance policies

Purchase agreement

Documentation related to seller-financing

Requests for services to be paid out of escrow funds.

Upon completion of all escrow instructions, the closing can take place. All outstanding payments and fees are collected and paid, and title to the property is transferred and the title insurance issues, as dictated by the escrow instructions.

An Escrow Agent/Holder does the following:

Prepares escrow instructions

Requests a title search

Complies with lender instructions specified in the escrow agreement

Receives funds from the buyer

Prorates insurance, tax, interest and other payments according to instructions

Records deeds and other documents as instructed

Requests the title insurance policy

Closes escrow when all instructions of the seller and buyer have been met

Disburses funds and finalizes instructions.

An Escrow Agent/Holder does NOT do the following:

Give advice to either party – the escrow agent is a neutral, third party